Laura Schoppe

Laura Schoppe

Laura Schoppe is commercial programs manager at Research Triangle Institute (RTI). Since having joined RTI in 1994, Ms. Schoppe has contributed to the transfer and commercialization of over a hundred technologies originally developed by government and commercial clients. As a senior research engineer, Ms. Schoppe specializes in developing effective commercialization strategies, creating innovative tools to market technologies, and helping clients craft and negotiate complex licensing agreements. She also has developed and presented training programs on assessing technologies and on small business development.

RTI is an independent organization dedicated to conducting innovative, multi-disciplinary research that improves the human condition. With a worldwide staff of more than 1,750 people, RTI is active in health and medicine, environmental protection, technology commercialization, education, and decision support systems. Universities in North Carolina founded RTI in 1958 as the first scientific organization in and centerpiece of the Research Triangle Park.

yet2.com recently spoke with Ms. Schoppe about the Institute´s technology commercialization practice.

Customized Technology Commercialization:
RTI´s Laura Schoppe

yet2.com: Describe RTI´s Technology Commercialization practice. What do you do, and who are your clients?

Schoppe: RTI´s Technology Commercialization team is composed of about 25 people -- all of whom have backgrounds in engineering and business. Basically, we help our clients take the technologies they developed for mission or product purposes and find secondary applications that would be non-competing. By licensing their technologies to companies outside their core business, our clients can generate significant new revenue. We provide a variety of technology transfer-related services-assessing technologies, marketing the licensing opportunities, assisting with the negotiation process -- all customized to meet each client´s needs. We also have a strategic alliance with the Intellectual Asset Management Practice of Deloitte & Touche to help deliver the various services a client may need.

As for our clients, we help a variety of organizations from both the public and the private sectors. Having received over 30 years of technology transfer services from RTI, NASA is one of our largest clients. We are also working with Fortune 100 companies and nonprofit clients; working with these organizations makes up another 30% to 40% of our business.

yet2.com: How does RTI typically become engaged in technology licensing negotiations?

Schoppe: The manner of our engagement varies depending upon the situation and client; nothing in this business is either average or standard. For most of our clients, we come to negotiations as part of an ongoing assessment of the technology and the business opportunity. Our involvement in the technology usually begins with an assessment of its value and identification of new applications. We bring to the negotiation all of the knowledge gained in the assessment regarding the technology, competing products, and emerging markets.

yet2.com: As a third party, what value does RTI provide to the negotiations?

Schoppe: The first thing we examine is the whole value package of the technology. What could this technology bring to the market? Where else could it be used? Our outside perspective helps the potential licensee realize that the technology can be of value in other areas that hadn´t been considered, which might help to speed up negotiations. Also, sometimes we bring other potential licensees to the table, and this often accelerates the deal -- showing that other companies are interested in the same deal often increases the interest level.

We also find that being able to talk not only in terms of the technology but also in reference to business parameters is of assistance. There is often a communication gap -- the licensor might be thinking solely about the technology or expenditures to date, while the licensee is thinking about making money. They both are trying to reach the same point, but are unable to communicate effectively. We help to bridge that communication gap.

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yet2.com: Describe some common problems that might impede negotiations.

Schoppe: Lack of testing can be a problem. Often the licensor developed the technology for a specific purpose and has test data or product information solely for that purpose. But, if the prospective licensee seeks to use the technology in a very different industry or application, the proof of concept might need to be done all over again. The point is, for a license to go through, the licensee needs to know if the technology fits the new application and what the eventual manufacturing parameters and switching costs will be. Without the proper testing data, it´s pretty hard to answer these questions.

Price is usually the last thing to be discussed, and it is not as hard to negotiate as one might think. The challenge with pricing comes from the fact that each party has its own perspective. When considering price, the seller looks at how much was spent in generating the technology, with cost being the pricing parameter. And the buyer views price with an eye toward potential sales. But cost and price have nothing to do with each other. The seller or licensor needs to recognize that the development costs are now sunken costs and have nothing to do with the price of the technology sale or license. The only thing that should be considered is the value of the licensee´s potential products. Think of the technology as a drill: You´re not selling the drill, you´re selling the holes that the drill makes, and that´s what you have to value. How much are those holes worth?

Another challenge with pricing is that every deal is unique. The price of the technology is affected by many factors. Market share for the licensees, applications for the technology, and other considerations are important, and you have to devise a pricing structure based on these issues. An auction model for pricing doesn´t really work because the licensor doesn´t understand enough about how someone´s going use the technology. The bottom line is that licensing comes down to relationship and trust, and you´re not going to be able to establish that through an auction-based transaction.

yet2.com: What are some of the factors that contribute to the length of negotiations?

Schoppe: When deals involve corporations, negotiation length might depend on the size of the company. With small companies, the deals typically go faster because there are fewer management layers to get buy-in from and typically there is only one lawyer involved, whereas large companies will often have more legal hoops to go through.

In addition to the size of an organization, the structure of a company also affects the length of negotiations. If a company is set up with a department that has the authority to license technology, such as companies like Procter and Gamble and Xerox have done, things tend to go much faster because decision-making is consolidated in one location. Negotiations involving companies without such a structure usually are significantly longer. The biggest issue usually is that there´s often uncertainty as to which groups have to sign off to close a deal. In these cases, the deal ends up being routed through several sectors of the company before agreement is finally secured. Companies that have a licensing department set up have already figured the process out. This speeds negotiations.

Negotiation length also can differ depending on whether a company has an effective strategy for dealing with its internal technology. Without this portfolio management, companies can´t easily determine if licensing a technology today will cause strategic problems in the future. In these cases, everything is slowed down, and negotiations could be brought to a complete halt without a good understanding across the corporation as to how a technology is embedded. Large and diverse conglomerates often don´t understand what technologies they have across the organization. We´ve worked with clients where we´ve found that one division had a need that another division could solve. Companies would benefit from getting a handle on their internal technology portfolios before trying to look outside.

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yet2.com: RTI works with a variety of clients from across many sectors. Do licensing deals differ in character depending on the parties involved?

Schoppe: Absolutely. Deals involving university and government institutions are very different from corporate licensing for many reasons. Fundamentally, the groups have different incentives, which contribute to the character of negotiations. While a corporation primarily cares about revenue, the government is not as focused on maximizing revenue. Although revenue is certainly a key consideration, the government has other drivers such as generating positive PR and helping the U.S. economy through the creation of jobs. Universities might be concerned with other factors. A state university might want to help grow business in the state or help professors spin out companies. Universities and government often will cut low-priced deals that wouldn´t be considered worth the effort by corporations.

Additionally, academia and the government are driven by furthering the institution´s mission and research to a greater extent than corporations. If a university or government technology transfer group doesn´t assist the professors, researchers, or civil servants in achieving their goals, these internal clients aren´t going to be very cooperative on future deals. The technology transfer group´s reputation within the university or government is based on the level of satisfaction of these internal clients, which is not always based on revenue generation. A researcher may be looking for a relationship to be established with a company like Dupont, and a license could be a way to open that door, leading to future collaborations that will not be reflected in the revenue generated from that license.

yet2.com: How do you price technologies?

Schoppe: You need to take a look at the whole market that the technology could serve in order to understand the full potential of the innovation. You need to consider the market share that the licensee could potentially attain. You also should look at which ancillary markets the licensee could go after that they previously could not; that´s where a lot of value comes through as well. At the same time, you also need to make sure that the licensor maintains a reasonable profit margin and is not taxed so much that it can´t make money, because obviously the deal will fall through. Licensing needs to be a win-win situation.

There´s often an emotional part beyond the economic equation. The licensee could be reaping a benefit through the name of the licensor. Being able to say that the company has a partnership with a technology-rich organization could be very valuable. There could be strategic considerations that play into the pricing as well. On the whole, the process of pricing a technology is not one simple step after another and a computer model will not capture all elements or accurately develop a price; it involves a compilation of an array of information and is an iterative process. In our experience, having a team in place that participates in the commercialization process from start to finish is the most efficient and effective way to achieve success in technology licensing.